What is the principal residence exemption in BC?

Direct answer

The Principal Residence Exemption (PRE) is a federal income-tax provision (Income Tax Act s. 40(2)(b)) that fully exempts a Canadian-resident individual from capital gains tax on a property they "ordinarily inhabited" as their principal residence for every year designated. Only ONE property per family unit per year can be designated as principal residence — couples cannot double-count a cottage and a city home for the same year. The "+1 rule" tacks an extra year onto the designation to cover the year of acquisition of a replacement property. Critical detail BC sellers underweight: since the 2016 reporting changes EVERY disposition of a principal residence MUST be reported on Schedule 3 of the T1 with the PRE designation made via Form T2091(IND), even if the gain is fully exempt. Failing to file is a CRA penalty trigger ($100/month, max $8,000) and can cost the exemption retroactively. The PRE does NOT auto-apply at sale. The federal anti-flipping rule (s. 12(12)) overrides the PRE for sales within 365 days of acquisition unless a life-event exception applies. The BC Home Flipping Tax (a separate provincial tax) extends the short-hold window to 730 days. The 2024 proposed 66.67% capital-gains inclusion-rate increase was cancelled March 21, 2025, so the inclusion rate remains 50%.